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The Financial Services Authority (FSA) has fined Nicholas Kyprios, Head of European Credit Sales at Credit Suisse in London, £210,000 for improper market conduct in disclosing client confidential information ahead of a significant bond issue in November 2009.
Credit Suisse acted on behalf of Liberty Global, Inc. (Liberty) during its takeover of UnityMedia GmbH (UnityMedia) which was part-financed by a €2.5 billion bond issue. So that he could market the bond to clients, on 9 November 2009, Kyprios was wall-crossed regarding the takeover and the proposed bond issue. He was given confidential information by Credit Suisse, told that it was inside information and instructed in writing not to disclose it to third parties.
On 11 November 2009 Kyprios called a fund manager to invite him to the bond issue road show. The fund manager told Kyprios he did not want to be wall crossed. Although Kyprios did not have a pre-meditated intention to disclose the client confidential information, the fund manager asked Kyprios about the bond issue and in response Kyprios engaged in a guessing game, including advising when the fund manager was “getting warmer”.
Kyprios was an active participant in the guessing game and could have extracted himself before straying into dangerous territory but he did not do so.
As a result of the guessing game, Kyprios signalled the following information to the fund manager:
- Unitymedia was potentially about to bring a big bond issue to market;
- the issue was intended to be announced the next day;
- the potential rating of the issue;
- Unitymedia would redeem outstanding bonds; and
- the issue was M&A related.
Tracey McDermott, acting director of enforcement and financial crime, said:
“While the FSA accepts that he did not set out to disclose the information, Kyprios' conduct in trying to push to the limit what he could say resulted in him crossing the line. His behaviour was well below the standards we expect of senior market professionals who we should be able to rely on to uphold the system rather than seek to get round it. The high penalty reflects the seriousness of Kyprios’ breach.
“Approved persons who have been wall-crossed need to recognise the value of the information they have been given and be vigilant in ensuring they do not inadvertently or recklessly disclose such information in breach of wall crossing procedures.”
Kyprios agreed to settle at an early stage and in doing so qualified for a 30% discount on the financial penalty. Without the reduction the FSA would have fined Kyprios £300,000.
Background
- The Final Notice for Nicholas James Kyprios
- Wall-crossing is a process whereby a company can legitimately provide inside information to a third party. It is often used in circumstances such as gauging interest amongst existing shareholders for a proposed transaction (for example, merger, acquisition or fundraising). Once a third party agrees to be wall-crossed, it can be provided with inside information and it is then restricted from trading or disclosing the information further until it is no longer inside information.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; securing the appropriate degree of protection for consumers; fighting financial crime; and contributing to the protection and enhancement of the stability of the UK financial system.
